1999 Special Article - Australia's international banking statisticsThis article was published in the 1999 issue of Finance, Australia (ABS Catalogue No. 5611.0)

INTRODUCTION

For many years the Bank for International Settlements (BIS) has been publishing a range of statistics relating to the cross-border investment positions of banks. The series have expanded over time as the policy concerns have evolved, extending from purely international banking statistics to include data on international securities markets as well.

The BIS international banking statistics are organised around two basic collection approaches. The first is 'locational', collecting quarterly data based on the residence of all banking offices located within a reporting economy. That is, all offices within a reporting economy report on their own (unconsolidated) business, without regard to whether the business is either owned by a foreign parent/head office, or whether it maintains branches or subsidiaries abroad. The reporting therefore includes cross-border positions with affiliated entities abroad. These data align broadly, in terms of the concept of residency of counterparties, to the residency concept that underlies the international statistical standards for balance of payments (BOP) and international investment position (IIP) statistics1. Today twenty-four economies report international banking and securities information quarterly to the BIS.

The second approach is to collect 'consolidated' banking statistics from 18 major industrialised countries on a worldwide consolidated basis. Some of these countries already report on a quarterly basis, with most expected to do so for data ended from December 1999. The consolidated reporting measures international bank assets according to the country of ownership of the banks, including the cross-border claims on and liabilities to individual countries of all the offices world wide of those head offices in reporting countries, but excluding positions between different offices of the same bank.

Until fairly recently, Australia has not had in place the data collections necessary to support either of the BIS reporting requirements.

Expanded Australian Bureau of Statistics (ABS) data collection

The ABS for many years has been publishing a wide variety of international investment statistics. The published data include the quite detailed requirements for international investment position statistics recommended in the IMF's Balance of Payments Manual (BPM5)2. These statistics include the type of investment capital (direct, portfolio, reserve assets, other), the investment instrument used to make the investment (bond, money market instrument, loan etc), the domestic sector issuing the instrument or holding the claim on a non-resident, the original contractual maturity of the investment, the drawings and repayments under certain instruments, and the investment income earned on these various instruments.

In addition, the ABS also publishes total foreign assets and liabilities by the industry of the Australian issuer or holder.

Foreign debt assets and liabilities are published by domestic sector further split between public and private ownership, and for liabilities, by where the instruments were issued (Australia or abroad). Debt assets and liabilities are also published by currency and residual maturity

Finally, fairly broad dissections of instrument detail within the types of capital identified in BPM5 are also classified by the country of counterparty for both investment transactions and the international investment position.

Few countries match the detail provided for Australia's international investment position statistics.

Recent international focus on financial crises around the world, and prospects for anticipating, preventing or ameliorating the impact of future crises, have all emphasised the need for transparency in many areas of policy and statistical measurement. Among these has been the focus on the external positions of financial institutions. The BIS data provide information not only on the exposure of individual economies financial institutions to debtor economies (already largely available from Australia's statistical system), but also, by aggregation the liability of debtor economies to the global banking system. (The BIS reporting is currently from 18 of the main creditor countries).

The global benefits of Australia being able to participate in BIS reporting are recognised. As part of the redevelopment of the ABS Survey of International Investment (SII), to meet the requirements of implementing the recommendations of then new international statistical standards for balance of payments (BOP) and international investment position (IIP) statistics3, the prospects of meeting some BIS requirements from additional cross-classifications of the IIP data were considered. The additional financial instrument detail being collected by the ABS from the September quarter 1996, and the identification of non-resident financial intermediary counterparties for some of those instruments, meant that much of the BIS locational statistics requirements could be met.

The ABS did not immediately take on board the requirements for consolidated global reporting by banks in its collections. Consolidated reporting is required for certain prudential regulatory purposes, and it is on this basis that the BIS consolidated reporting requirements were developed. In Australia's context, with a changing regulatory framework, it was decided not to pursue expanded statistical reporting until the future prudential reporting requirements were known. The ABS is now working with both the Reserve Bank of Australia and the new banking supervisor, the APRA, to develop longer term coordinated data collection arrangements across the finance and insurance industry.

What the Australian locational data adds to the BIS statistics

While a detailed analysis of Australia's international investment statistics is already possible, this form of analysis is not quite the same as provided in BIS statistical summaries, and therefore does not readily lend itself to aggregations of debtor country liabilities across the global banking system.

International users can currently analyse the BIS international banking statistics to observe the total liabilities of individual countries to the banking systems in the BIS reporting countries. As well as being a good and cost effective way to get the information, such creditor database approaches are often seen as more reliable and more timely than accessing debtor country information on a consistent basis.

By adding Australia's data to the BIS system, its users will have ready access to Australia's information on a basis consistent with the other reporting economies, and obtain an improved perspective on the total liabilities of many other economies to the global banking system. The following examples illustrate the improvements that clients will see once the Australian data are included in the BIS data sets.

Australia's BIS tables

The BIS has reviewed sample ABS output locational banking statistics and has concluded that it will be adequate to satisfy BIS reporting requirements in future and be included in the published BIS banking statistics in the second half of 2000 for use in analyses of the global banking system.

Table A below presents the international claims of Australia's depository corporations ie, Australia's 'bank' claims against the rest of the world, that meet the broad requirements for locational claims information to be reported to the BIS . While most of the country details can be shown for total claims, once the information is cross-classified by instrument, many of the country cells need to be suppressed to protect the confidentiality of the businesses providing the information.

The BIS also requests that these data be further cross-classified by the currency of the claims. The ABS data can only be cross-classified by currency at the total instrument level and not also by country.

There are some limitations to the data footnoted on the tables. In particular, a bank/non-bank split of foreign liability issuers can only be provided for loans and deposits and permanent debt liabilities held in a direct investment relationship (the key focus of the banking statistics analysis and which accounts for two thirds of Australian bank claims on the rest of the world).

Table A shows that while we have significant bank claims against New Zealand (which is not a BIS reporting economy) much of Australian banks' foreign claims are against BIS reporting economies. Comparison with these countries' BIS data may help improve the understanding and analysis of the information, and also offers some prospect of improving the quality of information being compiled.

As would be expected, most of the Australian bank claims on the rest of the world are denominated in foreign currencies, and the US dollar and the UK pound are the most significant of these.

To complete its picture of the 'international' position of Australian banks, the BIS asks not only for the banks claims on and liabilities to non-residents, but also for foreign currency positions with residents. This information, shown as memorandum items to Tables A and B, is only available for resident deposits (about US$7 billion) and loans to residents (US$10 billion).

Table 1. International claims of Australian depository corporations, as at 30 September 1999 (a)

Total all instruments

Loans and deposits

Debt securities

Other assets

Country

Total

On banks (b)

On non-
banks (b)

Total

On banks (b)

On non-
banks (b)

($m US)

($m US)

($m US)

($m US)

($m US)

($m US)

($m US)

($m US)

Belgium and Luxembourg

n.p.

n.p.

0

n.p.

n.p.

0

0

0

Brunei

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

0

0

Canada

131

n.p.

n.p.

107

n.p.

n.p.

24

0

Central America and Caribbean

258

182

76

n.p.

n.p.

76

n.p.

0

Chile

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

0

0

China Peoples republic of

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

Fiji

n.p.

n.p.

0

0

0

0

0

n.p.

France

73

73

0

45

45

0

n.p.

n.p.

Germany

1,568

n.p.

n.p.

1,474

n.p.

n.p.

n.p.

n.p.

Greece

1

1

0

2

2

0

0

0

Hong Kong

843

458

385

746

361

385

n.p.

n.p.

Indonesia

169

97

72

n.p.

n.p.

72

0

n.p.

Ireland Republic of

n.p.

n.p.

0

n.p.

n.p.

0

0

0

Italy

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

0

0

Japan

549

432

117

294

177

117

85

169

Korea Republic of

237

n.p.

n.p.

162

n.p.

n.p.

n.p.

n.p.

Malaysia

60

38

22

50

28

22

n.p.

n.p.

Mexico

0

0

0

0

0

0

0

0

Netherlands

159

n.p.

n.p.

142

n.p.

n.p.

n.p.

n.p.

New Zealand

4,516

3,757

759

3,358

2,599

759

348

810

Papua New Guinea

336

52

284

n.p.

n.p.

284

0

n.p.

Philippines

93

n.p.

n.p.

30

n.p.

n.p.

n.p.

n.p.

Singapore

2,746

2,566

180

2,547

2,367

180

n.p.

n.p.

South Africa

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

0

0

Sweden

n.p.

n.p.

0

n.p.

n.p.

0

n.p.

0

Switzerland

96

96

0

n.p.

n.p.

0

0

n.p.

Taiwan

18

n.p.

n.p.

n.p.

n.p.

n.p.

0

n.p.

Thailand

166

2

164

n.p.

n.p.

164

0

n.p.

United Kingdom

9,386

8,335

1,051

5,086

4,035

1,051

27

4,273

United States of America

7,555

5,420

2,135

3,811

1,676

2,135

304

3,440

Africa nes

206

165

41

206

165

41

0

0

America nes

44

n.p.

n.p.

44

n.p.

n.p.

0

0

Asia nes

n.p.

n.p.

n.p.

90

n.p.

n.p.

0

n.p.

Europe nes

193

n.p.

n.p.

193

n.p.

n.p.

0

0

Oceania nes

34

n.p.

n.p.

n.p.

n.p.

n.p.

0

n.p.

International capital markets

n.p.

n.p.

0

n.p.

n.p.

0

n.p.

n.p.

Unallocated

3,636

5,211

902

3,163

3,907

902

773

1,269

Total

33,073

26,885

6,188

21,550

15,362

6,188

1,561

9,961

Of which:

Australian dollars

4,948

3,135

1,813

4,193

2,380

1,813

n.p.

n.p.

Foreign currency:

28,125

23,750

4,375

17,351

12,976

4,375

n.p.

n.p.

United States dollars

14,057

10,443

3,614

10,057

6,443

3,614

549

3,451

Euro

267

n.p.

n.p.

214

n.p.

n.p.

n.p.

n.p.

Japanese yen

457

402

55

142

87

55

n.p.

n.p.

United Kingdom pound

6,393

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

4,268

Swiss franc

140

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

n.p.

Other

6,811

6,249

562

4,718

4,156

562

n.p.

n.p.

Memorandum item:

Foreign exchange claims on residents

9,729

n.a.

n.a.

9,729

n.a.

n.a.

n.a.

n.a.

n.p. Not for publication

n.a. Not available

(a) Includes all financial instruments except derivatives

(b) A non-resident bank/non-bank split is only available for loans, currency and deposits, and direct investment permanent debt securities

Table B shows that for loans and deposits liabilities to banks abroad, the BIS reporting area is very significant. Such liabilities to non-banks abroad are predominantly concentrated in the BIS reporting area but confidentiality for many of the individual countries means that the significance is not obvious.

Unlike the Australian bank claims, in the Australian bank liabilities the Australian dollar is much more significant. Much of the deposit liabilities and virtually all of the equity, trade credit and miscellaneous account liabilities (together shown as 'other' liabilities) to the rest of the world are denominated in Australian dollars. A little over one quarter of the debt security liabilities are denominated in Australian dollars. Within the foreign currency liabilities, the US dollar and Japanese yen account for over three quarters of the position.

Comparing BIS information with Australia's liabilities to and claims on the world banking system

The BIS 'banking' system covers the reporting by depository corporations other than the central banks of reporting economies. This broad concept of banks is consistent with the depository corporations sector in ABS statistics. The term "banks" is used in this context in the remainder of this article.

The BIS data also cover all forms of financial instruments (debt and equity) covered in BPM5 recommendations for IIP statistics except financial derivatives (which are the subject of separate BIS investigation and reporting).

The BIS reporting of locational statistics therefore currently captures most of the liabilities of Australian residents to BIS-reporting depository corporations. At 30 September 1999 the BIS estimated the level of such Australian liabilities at US$75 billion. This compares with the total Australian liabilities to the rest of the world of US$144 billion as measured by the ABS. The differences between the two measures relate largely to the scope and coverage of the BIS data. In particular it indicates the extent of liabilities to investors other than BIS banks.

The differences between the ABS and BIS locational data sets can be best illustrated by first focussing on those elements in the data sets that are similar. Australian bank loan and deposit liabilities to non-resident bank creditors (almost all BIS banks) at 30 September 1999 was US$34.9 billion (see Table B above), which is US$0.8 billion below the level of claims identified by BIS reporting banks. Most of this difference is expected to be in the definition of 'loans' used by the BIS. These differences primarily relate to securities repurchase agreements and trade bills.

The BIS definition of loans includes bank claims under securities repurchase agreements (or repos) and certain trade bills. In ABS statistics, repurchase agreements are regarded as outright securities transactions. That is, if an Australian bank sells a Commonwealth Government security under repo to a BIS bank, the ABS records the security transaction as an increase in Australian Government liabilities to the rest of the world, whereas the BIS will show the cash proceeds of the transaction as a loan extended to the Australian bank until the securities are returned for cash. The Australian repo market is large, with $3,000 billion or so in annual turnover. The average amount outstanding in the Australian repo market was probably about US$25 billion to US$30 billion in mid 19994, of which about US$1 billion may have been booked with offshore counterparties (although the amount at any point may be much larger or lower).

Trade bills, for example, bills of exchange drawn by foreign suppliers on resident companies to cover Australian imports, and which are accepted by Australian banks, will be recorded as securities liabilities in ABS statistics. In the BIS data, these amounts are classified as loan liabilities of the Australian banks. The BIS reporting bank holders will record Australia as the final debtor based on either the residency of the drawee (the BIS recommended treatment) which may also imply attributing the liability to the sector of the drawee as well, or the residency of the accepting bank. In either case it will be Australia, but it is probable that many of the reporting banks will classify the positions as claims on Australian banks. It is the Australian banks' acceptance of the bills that makes them an acceptable security in the international bill market. At 30 September 1999 Australian bank accepted bill liabilities to the rest of the world were about US$9.3 billion, some of which will have been held by BIS reporting banks.

BIS 'loan' claims against non-bank Australian residents (ie, all claims except for securities) were reported at US$14.1 billion at 30 September 1999. In contrast, ABS data show only about US$6 billion in the more specific instrument for loan liabilities to banks in the BIS reporting area. Part of the difference between ABS and BIS measures may again lie in BIS reporting banks classifying some of Australia's substantial bill liabilities to the sector of the drawee (ie, the Australian importer) rather than to the sector of the reporting bank. Part of the difference will also lie in the repo activity of Australian insurance and pension funds 'selling' securities under repurchase agreements that BIS banks will report as loans to Australia. And part of the difference lies in the trade credit and other liabilities of Australian non-bank debtors (totalling US$7 billion) that are partly captured in the BIS definition of loans and for which the ABS cannot separately identify bank creditors from other creditors.

The BIS reporting banks show debt securities and other claims against issuing banks in Australia of only US$14 billion at 30 September 1999. At the same time in ABS data for Australian banks, security liabilities to BIS reporting areas of about US$70 billion are measured (out of total bank security liabilities to all countries of US$72.5 billion shown in Table B). These amounts include Australian bank accepted bill liabilities to the rest of the world (US$9.3 billion). Other liabilities of Australian banks amount to a further $23.8 billion, again with most of the amount owed to BIS countries. However, the ABS cannot identify the type of non-resident holder of any of these securities. In some cases, the securities are held by nominees on behalf of unidentified non-resident clients. In other cases, the securities are issued into international capital markets and the country of holder of the security is not known. However, in most cases the securities will be held by non-resident institutional investors (for example, insurance corporations and pension funds) rather than BIS banks.

The debt securities and other claims of BIS reporting banks against non-banks in Australia are only US$11.8 billion at 30 September 1999. However, the debt securities liabilities of Australian non-banks to the rest of the world, which are not part of the BIS reporting system, are very much larger at about US$78 billion. The ABS cannot identify the BIS bank holders of these securities. Much of the debt is issued into international capital markets. A significant proportion is issued domestically and held by nominees on behalf of non-residents, again without identification of the sector of the non-resident. It is probable that most of the debt securities will be held by non-bank investors. Some of the debt is also held outside the BIS reporting area. Much of the residual 'other' liabilities of non-banks in Australia are for trade credit which has been extended by suppliers and will not be in the BIS reporting system.

On the Australian claims side, in the ABS data the reported loan and deposit claims of Australian banks on banks in identified BIS reporting areas are US$10.6 billion (out of total loan and deposit claims against all foreign banks of US$15.4 billion shown in Table A above). In addition, there are claims of US$0.4 billion that can only be allocated to broad continent groupings (which may be positions with BIS reporting areas) and a further US$1.1 billion that is not allocated to any specific country (ie, it is reported as 'other'). These results compare with a slightly higher BIS-reported 'deposit' liability of US$17.7 billion to Australian banks. Once again, the BIS data will include liabilities under repos (where the BIS bank has sold securities to Australian banks under a commitment to repurchase them), and may include bill liabilities of non-residents that are held by Australian banks as securities but that have been accepted by BIS banks.

BIS banks identify 'deposit' liabilities of US$10.8 billion to non-bank Australian residents. The ABS identifies deposit claims by these residents of only US$1.6 billion. Again, the repo liabilities of BIS banks to Australian insurance corporations and pension funds will boost the BIS total, as will Australian export bills reported in ABS data as securities holdings, but if accepted by a BIS bank will be reported as BIS bank liabilities. Some part of the difference may also relate to households in Australia maintaining bank accounts abroad, which are not captured in ABS measures of Australia's foreign assets.

Further information

For further information about these banking statistics and future reporting to the BIS of the information included in the tables in this article as well as data on a 'nationality' basis (reflecting the ownership of the Australian resident banks), please contact Michael Davies on Canberra (02) 6252 5601, or fax (02) 6252 6164 or email michael.davies@abs.gov.au.

Footnotes

1 International Monetary Fund, Balance of Payments Manual, Fifth Edition, Washington DC, 19932 Based on data on repo outstandings shown in the 1999 Australian Financial Markets Report published by Australian Financial Markets Association.